LABH COMBINES PVT. LTD.,,KOLKATA vs. DCIT, CIRCLE 7(1),, KOLKATA

3 ITA Nos.2382/Kol/2025 Labh Combines Pvt. Ltd. Act. The copy of the reason recorded is available at page no. 96 of the paper book which is extracted below:

“The Assessee company filed its return of income on 13 10.2017 declaring total income at Rs 1,72,78,870/-. No assessment u/s 143(3) of the Income-tax Act, 1961, or u/s 147 of the act has been made in this case. 2. Subsequently information was received on 14.12.2018 from DDIT (Inv.), Unit- 1(3) Kolkata that the assessee company has availed the accommodation entry in from of unsecured loan or and in other forms to the tune of Rs.2,35,00,589/- during the F. Yr. 2045,16. Out of which Rs. 1,80,00,429/- was taken from Mis M A Finance Services Pvt. Ltd. and Rs.55.00.160/- was from M/s Zenith Fiscal Services Pvt. Ltd. 3. Search & seizure operation u/s 132 of the Income-tax Act 1961 was carried out on 21.05.2018 in the case of Banka Group of concerns. It was informed on the basis of findings & information gathered on records by the Investigation officer that accommodation entries were provided by Shri Mukesh Banka through his managed & controlled paper/shell concerns to several beneficiaries including the assessee company in the guise of unsecured loan and or other forms. It was also shared that the concerns involved in rotating of such unaccounted money had no business activities, no profit was accumulated over the years, negligible turnover reported in their respective return under the head Income from other source, the directors of those companies were dummy directors and moreover most of those companies were found non-existent. These facts had been accepted by Shri Mukesh Banka in his statement recorded u/s 132(4) of the act 4. It is true that the assessee has filed its return of income where various information weredisclosed. However, the requisite full and true disclosure of all material facts related to the informationhad not been made as noted above in the reasons for reopening were embedded in such a manner that maternal evidence could be discovered by the then AO and could have been discovered with due diligence, accordingly attracting provisions of Explanation 1 of section 147 of the act. 5. It is evident from the above discussion that in this case, the information under consideration was not available before the AO at that point of time. The material facts regarding accommodation entry involve in the information was not disclosed by the Assessee company during the course of regular assessment. 6. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income of chargeable to tax has escaped assessment. Hence, I have reason to believe that 55.00.160- chargeable to tax has escaped assessment for the AY 2017-18.” 6. A perusal of above reasons, reveals that the AO in para 2 has stated that as per the information received from DDIT (Inv.), Unit-1(3), Kolkata assessee has received accommodation entry in the form of unsecured

4 ITA Nos.2382/Kol/2025 Labh Combines Pvt. Ltd. loan or in other form to the tune of Rs. 2,0035,589/- during FY 2015-16 and also given the details from whom the money was received by the assessee. We note that the AO has reopened the case on the basis of wrong information which pertained to FY 2015-16 relevant to AY 2016-17 whereas the impugned assessment order is A.Y. 2017-18. Similarly, we note that the Ld. CIT(A) in the appellate order at page no. 9 para 13.7 noted the same facts and finally affirmed the addition by dismissing the appeal of the assessee.

“The reopening of assessment under section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the Assessing Officer that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of section 147 (1). [Para 24] The first part of section 147(1) of the Act requires the Assessing Officer to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation ofreason to believe that is subject-matter of examination. The Assessing Officer being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he

5 ITA Nos.2382/Kol/2025 Labh Combines Pvt. Ltd. forms the reasons to believe, the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre-condition to the assumption of jurisdiction under section 147. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. [Para 26] In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed, it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 8. Similarly, the Hon’ble Bombay High Court in the case of PCIT Vs. Shodiman Investments Pvt. Ltd. (2018) reported in 93 taxmann.com 153 dated 16.04.2018 has held as under:

The submission of the Dept that in view of Rajesh Jhaveri 291 ITR 500 (SC), the AO can reopen the assessment for "whatever reason" is preposterous. The AO cannot reopen on the basis of info received from DIT (Investigation) that a particular entity has entered into suspicious transactions without linking it to the assessee having indulged in activity which could give rise to reason to believe that income has escaped assessment. Such reopening amounts to a fishing inquiry. The AO has to apply his mind to the information received by him from the DDIT (Inv.) and cannot act on borrowed satisfaction. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is evidence of a fishing enquiry and not a reasonable belief that Income chargeable to tax has escaped assessment." 9. Judgment of Hon’ble Delhi High Court in the case of Sarthak Securities Co. Pvt. Ltd. Vs. ITO (2010) 329 ITR 110, wherein it has been held as under:

"The law postulates that AO (and not the Addl. Director of IT) to have reason to believe. Blind acceptance of the information furnished by the Addl. Director of IT cannot form reasons leading to the belief by the AO of any escapement of income. Your goodself has to independently apply his mind to the information received from the Addl. Director of IT and arrive at the belief that income has escaped assessment." 10. The same issue was held by the Hon’ble Delhi High Court in the case of CIT Vs. SFIL Stock Broking Ltd. (2010) 325 ITR 285 (Del), wherein it has been held as under:

6 ITA Nos.2382/Kol/2025 Labh Combines Pvt. Ltd. From the above, it is clear that the Assessing Officer referred to the information and the neo directions as "reasons" on the basis of which he was proceeding to issue notice under Section 148. We are afraid that these cannot be the reasons for proceeding under Section 147/148 of the said Act. The first part is only an information and the second and the third parts of thebeginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on the facts. The law is well settled. There is no substantial question of law which arises for our consideration. 11. We therefore, respectfully following the ratio laid down in the above decisions are inclined to quash the reopening of assessment and the consequent assessment order framed by the AO as bad in law and nullity. Since, we have allowed the appeal of the assessee and other issues raised on merits are not being adjudicated at this stage and are left open to be decided at later stage if the need arise for the same.

Order pronounced on 17.02.2026.

SD/- SD/- (Pradip Kumar Choubey) (Rajesh Kumar) Judicial Member Accountant Member

Dated:17.02.2026 AK,Sr. P.S. Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR)

//True copy// By order

Assistant Registrar, Kolkata Benches